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When are 1099’s Required?

Posted by Brent Thompson on Nov 13, 2014 9:00:00 AM

When are 1099's Required?The question seems fairly straightforward. So then why does the IRS have 8 pages of instructions regarding the 1099-MISC form? There are multiple types of 1099 forms, but the following information applies to the 1099-MISC only. Let’s see if we can’t make this a bit simpler.

Who?

If you are making payments in the course of your trade or business, then filing the form 1099-MISC is required. Nonprofit organizations, trusts of qualified pensions or profit sharing plans of employers, payments by government agencies, and a few others are also considered to be engaged in a trade or business. 

What?

The above entities are required to file a 1099-MISC when they have paid:

  • At least $10 in royalties
  • At least $10 broker payments in lieu of dividends or tax-exempt interest
  • At least $600 in rents
  • At least $600 in services
  • At least $600 in prizes and awards
  • At least $600 in other income payments
  • At least $600 in medical and health care payments
  • Any fishing boat proceeds and various other payments related to fish and crop insurance proceeds
  • Gross proceeds of $600 or more paid to an attorney

This form is also used to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment and for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

As the case usually is with the majority of tax-related items, there are some exceptions to these rules. The form 1099-MISC is not required for the following payments:

  • Most payments made to a corporation (there are some exceptions to this, and they are listed above, in addition to payments by a federal executive agency for services)
  • Payments for merchandise, telegrams, telephone, freight, storage and similar items
  • Payment of rent to real estate agents
  • Wages paid to employees
  • Military differential wage payments made to employees while they are on active duty in the Armed Forces
  • Business travel allowances paid to employees
  • Cost of current life insurance protection
  • Payments to a tax exempt organization including tax-exempt trusts, the United States, or a state
  • Payments made to or for homeowners from the HFA Hardest Hit Fund or the Emergency Homeowners’ Loan Program

When?

In most cases, you are required to furnish a copy to the payee by January 31, 2015 for the 2014 tax year. Filing with the government is required by March 2, 2015, or March 31, 2015 if you are filing electronically. When you file the 1099, a summary form, Form 1096, is required to be filed with your 1099’s.

The above summary may not cover your specific situation. If you have any questions, please call one of our team members.

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For another blog post about 1099 forms, check out:
1 Reason Why Small Business Owners Need to Think About 1099 Forms

This blog was co-authored by Andrea McManamon:

Andrea McManamon is a Manager in the Assurance Services Group with over fifteen years of experience in public accounting. Andrea’s experience comes from working with a wide variety of clients in various industries such as manufacturing, distribution, communications and not-for profit organizations.

Image credit: Tax Time (41/366) by Mike Chaput via Creative Commons License Attribution-NonCommercial-ShareAlike 2.0

Topics: Small Business

Brent Thompson

Brent Thompson

Brent Thompson is a Vice President in the Tax Services Group. Brent and his wife Rachel have four daughters and enjoy cycling and hiking in CVNP.

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